The Risks and Consequences of Hiding Assets During a Divorce

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Divorce is stressful enough even in the most amicable situations but some divorces can get complicated and messy if a spouse is hiding assets during the process.

Unfortunately, some spouses are tempted to protect themselves by hiding money and other assets to avoid having to divide those assets with their spouses. Not only is it illegal to hide assets during a divorce, but it also puts you at risk with the court. Divorce attorneys know just how to uncover any efforts made to hide assets, meaning that you will most likely not get away with it. Those going through the divorce process should also know that hiding assets come with serious consequences if discovered.

It is not uncommon for people to try and hide assets to retain more of the community estate, but if they are discovered, the court not only divides the “hidden assets” but penalizes them for their failure to disclose. Because the judge can make any decision they want within the boundaries of California law, any dishonesty or hiding of assets will result in severe penalties. In extreme cases, people could also face possible jail time.  You may also end up having to pay the legal fees and costs of your former spouse, and the entire asset may even be awarded to them as well.

California law requires that both spouses make full disclosure of all their assets and obligations and provide equal access to this information during a divorce. Each party meets this requirement by completing preliminary and final declarations of disclosure and certifying under the penalty of perjury that the supporting documents are true and complete. This duty continues until the parties divide the asset. If you learn later that your spouse failed to disclose an asset and you prove this to the court’s satisfaction, you will be entitled to a minimum of 50 percent of that asset’s community value.

In every divorce, you and your spouse are required to sign financial declarations, which is a summary of you and your spouse’s financial circumstances. It is a legal document that includes information about your income, assets, debts, and other finances. Your income and assets affect a variety of factors in your divorce including the division of property, alimony, and child support.

In some circumstances such as fraudulent or willful nondisclosure, the court may award the entire asset to the other spouse. It’s important to discuss with your attorney your suspicions and/or discovery that your spouse has failed to disclose assets. The process of addressing an undisclosed asset differs, depending on whether you learn of the omission before or after the divorce is concluded. Your attorney will advise you of the proper procedure to address the undisclosed asset. Statutes of limitation require that you attend to this issue immediately.

It’s important that you and your former spouse treat each other with good faith and fair dealing. This means that neither of you can permissibly conceal, dispose of, or otherwise mismanage community property. Also, once you file for divorce, the Automatic Temporary Restraining Orders (ATROs) take effect, and neither you nor your spouse may withdraw or dispose of any assets other than in the normal course of business; that is, as you did with your spouse’s knowledge and consent during the marriage.

ATROs help ensure that the status quo is maintained between divorcing spouses and establish specific ground rules regarding a couple’s assets, insurance policies, and wills. Notwithstanding the restrictions the ATROs impose, spouses do all kinds of things during the divorce. If you don’t have documentation that your former spouse tried to hide assets, it can be very hard to prove a breach of fiduciary duty and/or an ATRO violation.

Attempting to hide assets during a divorce comes with the risk of losing a lot more than what you were hoping to hide in the first place. If you suspect that your spouse is hiding assets during your divorce, contact an experienced family law attorney who can help guide you through your options to make sure that your spouse is being compliant with the California divorce process.

Written by Debra Schoenberg



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